Horton Presentation Future Trends Final Final 1-24 …...+RUWRQ*URXS_ ,QVXUDQFH 5LVN $GYLVRU\...

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Horton Group | Insurance / Risk Advisory / Employee Benefitswww.thehortongroup.com | 1

PRESENTED BY:

Mike Wojcik, MBA,CLU,CFP®Senior Vice PresidentPublic Sector Practice GroupThe Horton Group

Future Trends in Health and Labor


Agenda

• Affordable Care Act / Legislative Update

• Challenges Driving Cost and Remedies to Offset

• Trends to Watch


Legislation Impacting Health PremiumsAffordable Care Act (ACA)

Federal and State of Illinois Level


Will the ACA Celebrate a 10th Anniversary?

March 23, 2010 Signing of the

Affordable Care Act (ACA)

Access and AffordabilityPaying Providers for Value, Not Volume

Focus on PreventionBending The Trend


Individual Health Market Results

• CMS final snapshot of 2019 -2020: Federal Exchange open enrollment period ended at 8.3 Million vs. 8.4 Million in 2018 and 8.7 million in 2017.

• Illinois enrollment: 294,263 vs. 312,280 in 2018 and 334,979 in 2017.

• Premiums decreased about 4%

• More Carriers Joined Exchanges


Individual Market


Healthcare Legislative News

A Slow Dismantling of the ACA

• December 22, 2017, President Trump signed the Tax Cuts and Jobs Act of 2017 which, beginning in 2019, eliminated the federal tax penalty for violating the individual mandate.

• As a result, a lower court hearing of Texas vs. Azar deemed the ACA unconstitutional shortly thereafter. More recently a Federal Appeals Court sided with the lower court but questioned if it was severable from the remaining 2,700 pages of the law, or if the whole ACA goes!

• It was sent back to the lower court to make a determination. A request was also made for the Supreme Court to hear this case (now dubbed the ACA Killer Case) before the 2020 election by twenty states including Illinois, AHIP and the AHA. As of Tuesday, The Supreme Court denied the request.


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December 20, 2019, THREE BIG TAXES REPEALED:

• Cadillac Tax – 40% excise tax scheduled for 2022, repealed effective 2020, will save clients $197 Billion.

• HIT Tax – repeal effective 2021, 2020 tax = $15.5 Billion.

• Medical Device Tax – 2.3% on goods, repeal effective 2020.

• The PCORI tax was extended for another 10 years, 2020 -2029.This tax funds research on clinical effectiveness.

• Repeal of these taxes should help with benefit planning and CBA discussions long into the future.



Other Legislative Movements:

• June 13, 2019, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury Department issued a final rule that expands the use of health reimbursement arrangements (HRAs).

• Effective 2020 the rule establishes two new types of HRAs:

• Individual Coverage HRA (ICHRA): Allows employers to replace traditional group health plan coverage and offer an HRA to reimburse the cost of Individual market premiums on a tax-preferred basis, subject to certain conditions.

• Excepted Benefit HRA (ECHRA): Allows employers that offer traditional group coverage to provide an HRA of up to $1,800 per year (as adjusted) to reimburse certain qualified medical expenses.



Other Legislative Movements, continued:

• ICHRA and ECHRA models are slow to adopt.

• Applicable Large Employer rules still apply. Groups are finding it difficult to determine affordability as age rates apply.

• More Rulings anticipated in Spring.

• Look for expansion of Association Plans, Medi-Share Plans and Individual Market Products to meet the new demand.

“Only Pay For What You Need.”

Sound Familiar?



Big Win for High Deductible – HSA plans:

• July 2019, IRS released Notice 2019-45 to add medical care services and devices, including prescriptions for a range of chronic conditions that can be provided by a HDHP without the deductible applying first.

• These Include: Hypertension, Congestive Heart Failure, Coronary Artery Disease, Asthma, Osteoporosis, Diabetes and Depression

• Note: Not all fully-insured plans have adopted this yet; self-funded plan adoption is optional.

• Yet to Be Determined: June 24, 2019 Executive Order (to review within 180 days), Direct Primary Care arrangements as eligible medical expenses under section 213(d).



Other Healthcare Biggies:

• On November 15, 2019 the final rule regarding Hospital Price Transparency was released and applies to 6,002 non-federal hospitals effective January 1, 2021. The charges listed would include real-time:

• Gross Charges

• Payer-specific negotiated charges

• Amount the hospital is willing to accept in cash from patient

• Others Legislation to follow by Spring:

• Surprise billing issues – impacting mainly Hospital Emergency Department billing, Air Ambulance, Non Network Providers

• Prescription Drug Pricing


ACA Compliance

ACA remains in-force, all other requirements remain in effect.

• Pay or Play Penalties increase for 2020:

• For calendar year 2020, the adjusted Penalty A amount is $2,570 and the adjusted Penalty B amount is $3,860.

• Affordability Test for Penalty B is 9.78% in 2020


Healthcare Illinois Legislative News

Health Care is Local:

• Look for greater development of laws and care impacting Illinois Providers and Insurance.

• 25 Illinois Mandates were added in 2019 – There are now over 100, the highest number of mandates in the country. California is #2.

• Look for a tax of $2.40 per-member per-month impacting Managed Care Organizations (HMO) in the near term.

• Healthcare is one of our Governor’s top 3 agenda items for 2020…...Is Medicaid buy-in possible?


Challenges Driving Cost and Remedies to Offset


State Of The Market

• Average Annual Family Premium = $20,576*

• Average premium for Family coverage increased 22% over past 5 years, and 54% over the past 10 years.*

• Health Costs are forecast to increase 5.7% annually in the U.S. for the next decade accounting for $6 Trillion in spend by 2027.**

• Growing concern about the impact of mental health costs.

• Covered workers contributed 18% of the single cost and 30% of the family cost, on average with considerable variation by industry*.

* KFF

** CMS


State Of The Market

• Employers continue to play a key role in the delivery of healthcare, covering almost half of the entire nation on their insurance plans.

• Main reason for offering employer-sponsored plans is to attract and retain quality personnel. Tax Incentives help.

• Healthcare remains about 18% of the economy and is the largest employer group*

• Headline Topics in 2019: Medicare for All, Opioid Addiction, Price Transparency, Retail Health, Social Determinants Of Health

• Within 10 years, all of the Nation’s 74 million baby boomers will be 65 or older, there’s never been a time like this.**

* USA Today

** National Institute of Aging


Employers Offering Health Benefits


State Of Health Insurance - Echo Last Year

• Carrier bottom lines have improved since early ACA.

• Trend has fallen to mid-single digits, mostly due to plan changes and lower utilization. Rx still runs higher than Medical.

• Group plans maintain richer offerings than individual Marketplace, especially in Public Sector.

• More groups are testing some form of self-funded and level-funded programs. Some growth in pooling risk: Associations, Co-Op’s and Captives.

• A bump in stop loss reinsurance and pooling charges due to High Cost Claimants frequency, but a lot of market capacity remains.


Is “Medicare For All” Possible?

Commercial Rates vs. Medicare

• Commercial Health Plans Pay Hospitals 241% of Medicare Rates.*

• Emergency Department charges increased to 555% from 225% of Medicare payment rates in 1996.**

• Inpatient charges increased to 350% from 175% of Medicare payment rates in 1996.**

• Outpatient charges increased to 375% from 225% of Medicare payment rates in 1996.

Are Commercial rates subsidizing provider’s Medicare business? What will change?

* Rand Health Study, ** Becker’s Hospital Review 1.7.2020


Insurance 101

Three Factors Impact Insurance Premiums

• Demographics

• Risk

• Trend (Influenced by network discounts, plan design and utilization)


Demographics and Risk Pool


Blue Cross Blue Shield Health Index

• First of Its Kind Measurement of Health for nearly every County in America.

• De-identified data from more than 40 millions commercially insured members of BCBS companies.

• Findings identified Top Five Conditions Affecting Health:

1) Depression, Anxiety and Mood Disorders

2) Hypertension

3) Diabetes

4) High Cholesterol

5) Substance use disorders


Cost Drivers – Millennial Health?

The Economic Consequences of Millennial Health*

• Millennials are seeing their health decline faster than previous generations. This includes physical and behavioral health conditions.

• These accelerated declines will result in greater demand for treatment and higher healthcare costs in the years ahead, projected to be as much as 33% higher than Gen-Xer’s experience at a comparable age.

* Blue Cross Blue Shield “The Health of America Report”


Cost Drivers – Millennial Health

* Blue Cross Blue Shield “The Health of America Report”


Price Changes Since 1998- Trend


Cost Drivers-Mergers & Acquisitions

Recent studies claim M & A involving Hospitals & Physician groups raise the cost of care.

• The Share of Physicians employed by Hospitals increased from 26% in 2012 to 44% in 2018, 55% in the Midwest.*

• Harvard researchers found hospitals acquired by health systems experienced a decline of in-patient experience scores while performance on 30-day re-admissions & mortality rates stayed flat.

• The New England Journal of Medicine found M&A’s have not lead to significant improvements in some patient outcomes.

• Exceptions to everything: Jim Skogsberg, CEO of Advocate Aurora refutes these assertions stating… “results have improved and are demonstrable and measurable.” Actually, their proof is such that they are taking on Risk in many of their contracts.

* Physician Advocacy Institute


Cost Drivers - Rx


Cost Driver - Rx

• 2019 Rx spend was $500B,12x’s more than $40B in 1990.*

• The market introduced a record-number 1,171 generic alternatives last year with 125 being first-time approvals. Generic drugs on average account for 85% of scripts filled today.**

• Specialty drugs continue to flood the market. They account for only 1-2% of total scripts filled, but as much as 50% of total Rx spend.

• The Average January 2020 drug price increase on 457 brand name drugs so far is 5.1%, compared to 5.2% in 2019 and 8% in 2018. Best seller Humira increased 7.4% after increasing 15.9% last year.***

* IMS Health Study: PEW Report** RxBenefits*** Good Rx; Institute for Clinical and Economic Review


Rx – Legislative Remedies

Legislation considered for 2020:

• Gaining faster market approval from the FDA for new drugs; increasing competition.

• House Bill H.R. 3 – CMS to negotiate: Insulin products; At least 25 single source brand name drugs for which there is no generic alternative; 125 of the highest spend category drugs. Negotiated maximum price not to exceed 120% of the average price in 6 named free market countries.

• President is seeking “most favored nation status”.

• The Downside: H.R.3 is projected to reduce pharmaceutical revenues to a point it will curtail development of 200 to 400 drugs in the next 10 years which will reduce Americans’ average life expectancy by about four months.*


Rx- State Level Remedies

State Level

• Drug Importation – Colorado, Florida, Maine and Vermont have passed laws creating Canadian importation programs (Vermont’s plan favors the Commercial market vs. only public payers). Biologics would be excluded for now.

• California is seeking to launch their own generic prescription drug label to sell to the public.

• Illinois is capping patient’s out-of-pocket outlay on insulin to $100 for 30 day supply. These drug categories increased 600% Since 2001**

* Council of Economic Advisers (CEA).

** IBM Watson Health


Rx Specialty Cost Driver

Controlling Specialty Drug Costs

• Specialty Drugs are Biologic (living cells) and are among the most expensive drugs on the market, costing $10,000 -$30,000 on average for a course of treatment.

• Of the almost 300 Drugs to be launched between 2019 and 2021, 2/3 are Specialty. More than half of these and the newer Specialty products being developed are covered under the medical benefit portion of health plans as opposed to retail pharmacy. They are primarily administered by infusion directly into a patient’s vein.

* Optum Rx


Rx Specialty Remedies

Specialty Site of Care Matters!

• Costs of infusion at a hospital can be as much as 200% higher than the same care in a physician’s office, and 300% more than home health care.*

• Close to 90% of Specialty Rx can be infused out of the hospital. Look for plans to require this – of course each case will be reviewed for medical necessity.

• Hikes in Specialty Rx drugs will remain in the 14% - 15% range.**

• Biosimilar alternatives are projected to come to market in 2023. They will cost 47% less than their brand-name counterparts.***

* Magellan Rx, ** Kiplinger Report, *** Biosmilars Council


Public Opinion Will Drive Change


Or Will It? Rx Dilemma

• According to OpenSecrets, a nonpartisan, independent research group tracking money in US politics, the Pharmaceutical Industry spent $194.3 million lobbying legislation in 2018*.

• More that $20M was contributed directly to campaigns last year.

* CNN Business- Open Secrets


Trends to Watch in Healthcare


Following The Biggies

Transforming Health Care*

• What are Walmart, Google, Apple and Haven (a partnership between Amazon, J.P. Morgan Chase and Berkshire Hathaway) doing?

• Dr. Gawande, CEO of Haven states their mission is to… “deliver simplified, high-quality and transparent health care at a reasonable cost.”

• They are adopting Value Care with two basic fundamentals:

• Primary First

• Getting the best care for major issues

* Harvard Business Review


Trends - Paying For Value

• Waste accounts for 25% - 30% of our Healthcare System.*

• Accountable Care Organizations (ACOs) pay providers for performance and outcomes. Today’s contracts require the provider to take on risk, emphasizing their performance to provide better overall care and control waste!

• Self-insured employer groups want to narrow the large gap between Commercial and Medicare payment rates. ACO contracts are a next step without moving to Reference Based Pricing (RBP).

• Look For Blue Cross to introduce a “High-Performance, ACO Network” program available nationwide starting January 2021.

* JAMA


Trend Rx – Precision Medicine

Gene and CAR-T Cell Therapies

• Gene Therapies introduce genetic material into a person and are intended to replace or correct a fault or missing genetic materials (DNA). Zolgensma ($2,000,000) extends life for SMA, Luxturna ($850,000) cures early blindness.

• CAR=T introduces a new gene into the patient’s t-cells to fight cancer. Harvest white blood cells and genetically manipulate them to express a receptor that targets specific proteins or antigens found on the surface of cancer cells. Modified cells are then re-infused back into the patient, where they target and kill cancer cells. $400K – $500K. Remission rate = 50%.

• There are currently several gene therapies in development for the treatment and possible cure of hemophilia. Look for a price tag of $1.5Million.*

* Megellan Rx.


Trends – Social Determinants

Social Determinants*

• Data shows your health can be determined not just by your genetic code but by your zip code.

• A study of 4,604 families over 11 years showed Children whose families moved to low-poverty from impoverished areas were admitted to the hospital nearly 16% less, curbing annual inpatient spending by 24%.

• Other findings show low socio-economic status is linked with a 2.1 year reduction in life expectancy for people ages 40 to 85.

• As the ROI is slow to determine, stakeholders are slow to jump in.

• As for now, Hospitals and Insurers are asking questions regarding social needs while treating a patient. Some go as far as connecting community resources.

* Modern Heatlhcare


Trends - Social Determinants

Social Determinants, continued:

• There are five social needs recommended by the federal government: Food Insecurity, Housing Instability, Utility Needs, Transportation Needs, Interpersonal Violence

• United Healthcare and the American Medical Association recently released another 23 medical codes for social determinants.

• HCSC, Blue Cross’ parent has recently purchased health centers to better control social determinants and offer more services to seniors.

• Hospitals are hiring social workers to address the need.

• Lyft and Uber are expanding their reach into healthcare integrating an app into caregivers electronic health record systems allowing them to schedule rides for patients. Rides are free or low cost to non-emergency medical appointments.


Trends - Primary Care First

• Primary Care is being considered the bridge from the status quo to a

more efficient and effective health system. The ROI comes from the

reduced use of hospitals and specialty services. Their roles play an

integral part in Accountable Care Organizations.

• Primary Care today represents a larger role tackling issues such as:

End of Life Care, Disparities, Mental Health, Unhealthy Lifestyles

and more.

• We see continued growth: Onsite Clinics and Direct Primary Care


Primary Care – Increasing the Supply

• University of Arizona’s medical school announced it will give

free tuition to some students who commit to working as

primary care doctors in underserved areas.

• Tuition free medical school is being offered at Kaiser

Permanente and NYU.

• Looking to expand their primary care footprint, Geisinger

Medical School to provide free tuition.

• Jaewon Ryu, M.D., President and CEO at Geisinger said…

“we’ve been able to prove that by focusing on primary care

we can improve outcomes, lower costs and improve

satisfaction among patients and providers”.


Trends – Redirection of Care

Virtual Medicine - Telehealth

• The potential is endless!

• A user-friendly means of providing almost immediate access to physicians, while lowering costs by 60% - 70% vs. traditional brick and mortar medicine.

• Telemedicine visits grew 261% between 2015 and 2017*

• 83% of employers offer tele-medicine, with most success of use coming by lowering cost share entry.

• Chronic Illnesses account for roughly 75% of all physician visits, 80% of all hospital admissions and 90% of all prescriptions. Continuity of care, monitoring and regular feedback is required to ensure patient's quality of life and control cost**. Tele-health and AI will play a critical role in addressing this quest.

* JAMA

** Dr. Wiesen, MediOrbis


Trends – Behavioral/Mental Health

Mental Health is Concerning

• 62% of missed work is due to mental health conditions*.

• 42% of employees surveyed came to work with suicidal feelings*.

• 81% said social stigma prevents them from seeking help.

• Greater than 55% of employees are not aware if mental health resources are offered through their medical plan or through an EAP.

• Mental Health is a major growth area for Telehealth including AI, not as therapists but to identify who might need help.**

• Starbucks has launched an app to help their employees improve mental health and deal with anxiety and stress.

* Unum Study

** Modern Healthcare


Trends – Artificial Intelligence

Artificial Intelligence (AI)

• Cutting Edge technology to cut administrative costs and provide better healthcare.

• Centene Healthcare Corporation is applying AI technology that can analyze 12 million medical data points in less than one minute and immediately identify medical red flags and gaps in care to ping doctors with real-time messages while they are treating a patient or writing a prescription.

• Their AI technology can also identify those likely to be at risk for opioid addiction, those least likely to comply with diabetes-care regimen and those most likely to require hospital re-admission, enabling providers and patients to get a jump on a health crisis and reducing costs in the process.


Trend - Worksite Well - Being

Worksite Well – Being will cover mind, body and spirit in every stage of life.

• 76% of Employees think their workplace has a responsibility for their health and well-being*

• 87% of Employees expect their employer to help them balance their work and personal lives**.

* MetLife Survey

** Gallup

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Key Takeaways


Key Takeaways

• The Affordable Care Act (ACA) and its requirements remain in-force. The Cadillac Tax, HIT Tax and Medical Device Tax were recently repealed, PCORI remains.

• Healthcare Costs continue to rise due to Innovation, Industry Mergers & Acquisitions, the Rx Quagmire, lack of Transparency and growing Mental Health.

• Health Care is Expensive, Health Insurance is Expensive partially because of that.

• Insurance Carriers bottom lines have stabilized from the onset of ACA.

• Aside from any major change, Trend will increase cost about 6% yearly for the next decade.


Key Takeaways

• Employers are more driven than ever before to take control of healthcare costs. Remedies being adopted:

• Stronger controls on Rx including, tighter formularies and establishing best outcome / site of care / pushing for Legislation.

• Redirection to Value: Primary Care, Telemedicine and Centers of Excellence for extreme care.

• Transparency for efficient Value-Based provider use

• Adopting tools with Artificial Intelligence for improved administrative costs and better health outcomes.

• Improving member education and engagement.

The “Only Pay For What You Need” Mentality is Catching Hold -Will it apply to Healthcare / Health Insurance Next?


Questions?

Horton Presentation Future Trends Final Final 1-24 …...+RUWRQ*URXS_ ,QVXUDQFH 5LVN $GYLVRU\...

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